Lesson 1 Flashcards
What is the role of the IASB?
The IASB sets international financial reporting standards and oversees the development of the IFRS.
IASB stands for International Accounting Standards Board
What does the standards setting process by the IASB involve?
The process includes the work of the IASB and the IFRS Interpretations Committee (IFRIC).
IFRIC stands for IFRS Interpretations Committee
What is the function of the IFRS Advisory Council?
The IFRS Advisory Council provides strategic advice to the IASB and helps in developing IFRS.
The Global Preparers Forum (GPF) is also involved in this advisory capacity.
Identify a key ethical issue for professional accountants in financial accounting.
Maintaining integrity and objectivity in financial reporting.
Ethical issues often require appropriate action to uphold professional standards.
What is the IESBA Code of Ethics?
The IESBA Code of Ethics outlines ethical principles for professional accountants, including integrity, objectivity, and professional behavior.
IESBA stands for International Ethics Standards Board for Accountants.
What does the Ghana Corporate Governance Code address?
It provides guidelines for corporate governance practices in Ghana, including accountability and transparency.
The Companies Act 2019 also relates to corporate governance.
How do sustainability and climate-related risks impact financial statements?
They affect the preparation and presentation of financial statements, influencing disclosures and assessments of risks.
This includes how companies report on sustainability efforts and compliance.
What are the qualitative characteristics of useful financial information?
The qualitative characteristics include relevance, faithful representation, comparability, verifiability, timeliness, and understandability.
These characteristics help ensure that financial information meets the needs of users.
What is the objective of general purpose financial reporting?
To provide financial information that is useful to a wide range of users for economic decision-making.
General purpose financial reports are not tailored to meet specific user needs.
What are the elements of financial statements?
The elements include assets, liabilities, equity, income, and expenses.
Understanding these elements is crucial for proper financial reporting.
Define recognition in financial reporting.
Recognition is the process of incorporating an item in the financial statements when it meets certain criteria.
This involves determining when to report an asset, liability, income, or expense.
What is de-recognition in financial statements?
De-recognition is the removal of an asset or liability from the financial statements when it no longer meets recognition criteria.
This process is important for accurate financial reporting.
What does measurement in financial reporting refer to?
Measurement refers to the determination of the monetary amounts at which the elements of financial statements are recognized and reported.
This can involve historical cost, fair value, or other measurement bases.
What is the significance of presentation and disclosure in financial statements?
Presentation and disclosure ensure that financial statements are clear and provide necessary information for users to make informed decisions.
This includes how financial information is structured and presented.
What does the concept of capital maintenance involve?
Capital maintenance involves ensuring that the capital of a company is preserved and not diminished through losses or distributions.
This is a key aspect of sustainability in financial reporting.
What is the focus of the ICAG Financial Reporting Paper - Area B?
Explain and apply appropriate accounting and financial reporting standards in the preparation of financial statements
This includes various specific topics as outlined in the appendix.
Name three key topics covered under the ICAG Financial Reporting Paper - Area B.
- Inventories
- Accounting policies and changes in accounting estimates and errors
- Events after the reporting period
What is the accounting treatment for government grants and assistance?
Accounting for government grants and disclosure of government assistance
This involves recognizing government assistance in financial statements.
How should changes in foreign exchange rates be accounted for?
Effects of changes in foreign exchange rates
This impacts the valuation of financial statements.
What are borrowing costs in the context of financial reporting?
Borrowing costs
These are costs incurred by an entity in obtaining funds.
What does financial instruments recognition involve?
Recognition, presentation and measurement of financial assets and liabilities (excluding derivatives and hedge accounting)
This is crucial for accurate financial reporting.
What is meant by impairment of assets?
Impairment of assets
This refers to a reduction in the recoverable amount of a fixed asset.
What are intangible assets?
Intangible assets
These are non-physical assets that have value, such as patents or trademarks.
Define provisions in financial reporting.
Provisions, contingent liabilities and contingent assets
Provisions are liabilities of uncertain timing or amount.
What is covered under the agriculture accounting standard?
Agriculture
This includes specific accounting treatments for agricultural activities.
What is the significance of income tax in financial reporting?
Income tax
It involves accounting for current and deferred tax liabilities.
What is the accounting treatment for property, plant, and equipment?
Property, plant and equipment
This involves capitalization and depreciation of long-term assets.
What is investment property?
Investment property
Property held to earn rentals or for capital appreciation.
What does ‘non-current assets held for sale’ refer to?
Non-current assets Held for sale and discontinued operation
These are assets expected to be sold rather than used.
What is revenue from contracts with customers?
Revenue from contracts with customers
This involves recognizing revenue when control of goods or services is transferred.
What is the purpose of leases in financial reporting?
Leases
Accounting for leases involves recognizing lease liabilities and assets.
What does the statement of cash flows represent?
Statement of cash flows
It provides information about cash inflows and outflows over a period.
What are related party disclosures?
Related party disclosures
These are required to inform stakeholders of transactions with related parties.
What is earnings per share (EPS)?
Earnings per share
A measure of a company’s profitability on a per-share basis.
What does disclosure of interests in other entities entail?
Disclosure of interests in other entities
This involves reporting on investments in subsidiaries, associates, and joint ventures.
What is fair value measurement?
Fair value measurement
It is the estimate of the market value of an asset or liability.
What is the main focus of Area C in the ICAG Financial Reporting Paper?
Prepare and present single entity financial statements in accordance with IFRS
This includes prescribed financial statements and relevant disclosure notes.
What financial statements are included in the preparation of single entity financial statements?
- Statement of profit or loss and other comprehensive income
- Statement of changes in equity
- Statement of financial position
- Statement of cash flows
- Disclosure notes
These statements are essential for compliance with IFRS.
What is the focus of Area D in the ICAG Financial Reporting Paper?
Determine the approach to accounting for business combinations and prepare consolidated financial statements
This section assesses understanding of accounting for groups of companies.
What are the key components in preparing financial statements for a group of companies?
- Separate financial statements
- Investment in associates and joint ventures
- Business combinations
- Consolidated financial statements
- Joint arrangements
These components are critical for accurate group financial reporting.
What must be determined for inclusion in group accounts?
Entities for inclusion
This involves understanding the definition of a business combination.
What methods of accounting must be understood for business combinations?
- Investments in subsidiaries
- Investments in associates
- Investments in joint ventures
These methods dictate how financial statements are consolidated.
What is the importance of intangible assets in group accounts?
Treatment of intangible assets on the acquisition of new businesses
This includes the identification of acquired intangible assets.
What implications must be considered regarding fair value in group accounts?
Fair value and other adjustments and related disclosures
These implications affect the overall financial reporting accuracy.
Fill in the blank: The ICAG Financial Reporting Paper assesses the preparation of financial statements in accordance with _______.
[IFRS]
True or False: The statement of cash flows is not required in the preparation of single entity financial statements.
False
The statement of cash flows is a key component of financial statements.
What does MSL stand for in the context of the International Accounting Standards Board?
MSL stands for the International Accounting Standards Board.
What is the role of the IFRS Interpretations Committee?
Supports in the application of IFRS.
What organization does the IFRS Foundation report to?
Reports to the Monitoring Board.
What is the primary purpose of the IASB?
Financial reporting is governed on a worldwide basis by the IASB.
What are the key aspects developed and published by the IASB?
Transparency, Accountability, Efficiency.
What does IFRS stand for?
International Financial Reporting Standards.
Who advises the IFRS Advisory Council?
The IFRS Advisory Council advises the IASB.
What is included in the IASB’s technical agenda?
Project priorities and issues in application/implementation.
True or False: The IASB makes decisions on accounting principles issued in the form of IFRS.
True.
Fill in the blank: The IFRS Foundation promotes and facilitates the adoption of _______.
IFRS.
What is a conceptual framework in financial reporting?
A statement of generally accepted theoretical principles which form the frame of reference for financial reporting.
It helps in avoiding a ‘patchwork’ or firefighting approach.
What are the advantages of having a conceptual framework for financial reporting?
- Avoids ‘patchwork’ or firefighting approach
- Less open to criticism or political/external pressure
- Provides a clear frame of reference for financial reporting
This clarity helps in consistency and comparability of financial statements.
What are the primary objectives of financial statements?
- Financial position
- Financial performance
- Cash flows
These objectives are typically represented by various statements such as the statement of financial position and the statement of profit or loss.
What are the main components of financial statements?
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of cash flows
- Statement of changes in equity
- Notes to the financial statements
- Directors report
These components provide a comprehensive view of a company’s financial health.
True or False: A single conceptual framework may not suit all users of financial statements.
True
Different users may have varying needs and purposes for financial information.
What is a disadvantage of having a conceptual framework for financial reporting?
Preparing and implementing standards is still difficult with a framework.
This can lead to challenges in practice despite theoretical clarity.
Fill in the blank: Financial statements are intended for a variety of users - a single framework may not _______.
suit all
This highlights the need for potentially different standards for different purposes.
What is the concept of ‘going concern’ in financial reporting?
The assumption that an entity will continue to operate for the foreseeable future.
This assumption is critical in determining the basis of financial statements.
